Online food delivery is a big market, and it’s on track to get much bigger. This $22 billion industry is expected to reach $28.4 billion by 2023. In fact, the online ordering and delivery sector has grown 300% faster than dine-in sales since 2014!
Call it the Amazon effect, but our increasing reliance on ecommerce is spilling over into the way people choose to order food. In fact, one survey showed that 45% of people would be more likely to order from a restaurant that has a mobile ordering service.
The increased popularity of these services has led to an explosion of options, from national to local versions. We’re going to explore some of the most popular services, how they work, and some ways to make the most out of them.
National Delivery Services
There are a number of nationwide delivery services that have gained huge popularity in the past 5 to 10 years.
When selecting a service, make sure to consider its convenience for your staff, costs to you, and costs to the consumer. If fees are too high for the customer at your restaurant’s price point, you may not see the boost in sales you’re hoping for.
UberEats
With a well-established fleet of contracted drivers, Uber decided to expand into the food delivery world in 2014 with UberEats.
How it Works
To use UberEats, customers place an order through the app on their smartphone or tablet. Restaurants are supplied with their own UberEats tablet, which will display the customer’s order. When the restaurant accepts the order, a driver is pinged and told when to pick it up based on the restaurant’s pre-selected prep time.
The payment is all done by the customer through the app, so no money exchanges hands when the driver arrives to pick up the food. UberEats also has a “closed bag” policy, meaning that orders are not inspected by drivers. They just pick it up and leave. So restaurants have to be very careful to get the order right.
Restaurant Costs
Restaurants have to pay a 30% fee on each sale to UberEats. If a dish costs the customer $10, $3 will go to UberEats. Some restaurants increase their costs on the platform to help cover these fees (although UberEats doesn’t encourage the practice).
Customer Costs
Customers pay a sliding scale delivery fee based on how close they are to the restaurant. Fees range from about $2 to $8. This could be great news if your restaurant is in a highly-populated area. But it could result in high fees if your restaurant is far from residential neighborhoods. UberEats can also implement surge pricing during particularly busy times.
Customers must also pay a 15% service fee on their total orders, and a “small order fee” on orders less than $10. If you think many orders would be less than $10 total, you may want to consider a different delivery service to avoid the small order fee for your customers.
GrubHub
GrubHub was the first company to really disrupt the restaurant delivery service. They work with over 125,000 restaurants in the U.S. and London.
How it Works
Customers can place orders through the GrubHub app, or on www.grubhub.com. Restaurants can also add a GrubHub button to their websites, directing their web traffic to the online ordering platform.
When the order comes through, the restaurant must accept it. Then a driver will be notified and will come to pick up the order and deliver it to the customer.
Unlike most other delivery platforms that don’t work with any POS systems, GrubHub integrates with Breadcrumbs POS. If you’re already on that platform, it can provide a really simple, seamless way to manage your delivery orders.
Restaurant costs
Grubhub’s fees depend on your market and if you choose a sponsored or unsponsored listing.
An “unsponsored listing” will not be prioritized in searches on the app. If you’re trying to get new business, this may not be the best choice for your restaurant, as you’ll be harder to find. But if your restaurant is already very popular and you anticipate people to search for it by name rather than cuisine, unsponsored may work for you. Fees range from 5-15% for this type of listing.
A “sponsored listing” will be prioritized in search results. But you’ll still have to compete with all of the other sponsored restaurants. The fees range from 20 – 30% for a sponsored listing.
There’s also a 10% delivery charge on top if you use GrubHub’s delivery drivers rather than your own. And there is a 3.05% + $0.30 credit card processing fee for each transaction.
Customer costs
GrubHub doesn’t charge anything directly to consumers, which is why the restaurant costs are higher.
Restaurants have some leeway on additional charges that they can asses to customers. They can set their own order minimums (usually around $10), small order fees, and delivery fees of $1 to $10.
DoorDash
DoorDash is the leader in market share for third-party delivery. So the volume of orders that restaurants receive may be higher than on competing services.
How it Works
Customers place their orders through DoorDash.com or their app. Restaurants will receive orders either on a tablet or by email/fax. For fast food restaurants, the driver will place the order in person. Customers pay through the DoorDash app, and payments (minus fees) are provided to restaurants weekly.
Restaurant Costs
Total restaurant commissions range from 20-30%, depending on the market.
Customer Costs
Customers pay a $0.99 to $7.99 delivery fee, as well as a 7% to 15% service fee.
Postmates
Unlike the rest of the services on this list, Postmates isn’t limited to restaurant orders. You can get just about anything via Postmates couriers, from lunch to a pair of socks to cough syrup.
How it Works
Postmates users place their orders through the app. But some orders are pre-paid, and others will be paid by the courier upon arrival with a corporate debit card.
This method provides some flexibility. For example, if the restaurant has to make a substitution, the Postmates driver can confirm the change with the customer before finalizing payment. This way, Postmates won’t have to issue a refund to the customer.
Restaurant costs
Postmates charges a 15 – 30% commission and discourages increasing prices to cover the fee.
Customer costs
Customers can order from just about anywhere, whether the restaurant partners with Postmates or not. Delivery fees range from $0.99 – $3.99 for partners and $5.99 – $9.99 for non-partners.
There is also a “variable percentage-based service fee,” but details about that fee range proved elusive. The platform also has a small cart fee for orders under $12.00.
Postmates offers a monthly subscription plan for $9.99 per month or $83.99 annually. Subscribers don’t have to pay the delivery fee if their order is more than $20.
Niche Delivery Services
Beyond these large delivery services, there are plenty of niche programs as well. Some focus on location. For example, Favor operates all across Texas. And Vroom services parts of Connecticut and New York.
Other services focus on a specific food category.
For example, Slice is a pizza delivery service that keeps restaurant rates very low — only $1.95 per order. Restaurants can set their own order minimums and delivery fees, which will go directly to the restaurant. There are no fees set by Slice that must be paid by the customer.
Caviar is another delivery service that focuses on higher-end restaurants. Restaurants must be accepted into the platform. This could be a great option for restaurants at a higher price point.
When selecting a delivery service, make sure to look at your smaller local providers. You may find an option with more favorable rates that can integrate with your website.
Provide Commission-Free Takeout Ordering
Most of the delivery services offer a takeout option as well. But you should also provide a commission-free takeout platform.
See if you can integrate your POS with your website for takeout orders. Or try a service like ChowNow, which charges a flat monthly fee instead of a commission.
Make sure the online ordering system is easy to find with a clear, prominent “Order Online” button. This will encourage customers to order directly from you when they’re planning on picking up, saving you the fees associated with delivery services.
Use Delivery as a Marketing Tool
Due to the fees that these delivery services charge, you may consider them more of a marketing tool than an actual money maker for your restaurant. Take advantage of the marketing aspect by trying to earn your delivery recipient’s repeat business.
Put a coupon into the bag before it gets sealed for pickup, offering a 10% discount for dine-in only. This will encourage customers to visit in person.
Or put a card in the bag thanking the customer for their order, and encouraging them to follow your restaurant on social media. You could also ask them to leave you a review on Yelp or Google.
Another option – include a card in the bag telling customers to sign up for your email list or for text messages. Let them know that if they sign up for your list, they’ll get exclusive access to special events and even occasional discounts.
Conclusion
Not all of these services will be the best fit for each restaurant. You’ll have to consider your profit margins and customer base before you can decide if one of these services is a good choice for you.
Most services aren’t tied to contracts, so you should be able to try one out without making a commitment. But with the huge anticipated growth in the online ordering sector, it’s an option that customers are beginning to expect.
